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HomeMy WebLinkAbout2014-03-18 WUCFD MINUTESWATER UTILITIES COMMUNITY FACILITIES DISTRICT CITY OF APACHE JUNCTION, ARIZONA •REGULAR MEETING MARCH 18, 2014 The regular meeting of the District Board of the Water Utilities Community Facilities District, City of Apache Junction, Arizona, was held on March 18, 2014 at the Apache Junction City Council Chambers pursuant to the notice required by law. CALL TO ORDER Chairperson Insalaco called the meeting to order at 6:00 p.m. ROLL CALL Board Members Present:Chairperson Insalaco Vice Chairperson Barker Mrs. Evans Mrs. Rizzi Mr. Serdy Mr. Waldron Mr. Wilson Staff Present: Others Present: George Hoffman, District Manager Kathleen Connelly, District Clerk Frank Blanco, District Director Joel Stern, District Legal Counsel John White, District Finance Manager Michael Loggins, District Superintendent Bryant Powell, Assistant City Manager Matt Busby, Assistant to the City Manager APPROVAL OF MINUTES OF JANUARY 21,) Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 1 of 7 2014 ) Mr. Waldron MOVED THAT THE MINUTES OF JANUARY 21, 2014, BE APPROVED. Vice Chairperson Robin Barker VOTE:Unanimous. The motion carried. RETIRING 2004 BOND SERIES DEBT ) District Finance Manager John White introduced Greg Swartz who has worked with the district and the city for many years on a number projects. Mr. Greg Swartz went over a reference guide that was given to each of the board members regarding the United States public finance.He stated if they had any questions now or before they take action April 1, 2014 to contact him.He told the board they were an issuer in the United States market finance.He went over three points. He briefly covered United States public finance and how the water district fits with this large market and how the board is going to transition from how they used to handle debt to how they will be handling in the near future.In the United States on an annual basis there are 350 billion bonds issued by local governments.This is only the long term debt which last more than two years.This translates into a daily volume of about 2.3 billion every single day.All of these bonds have four things in common.They are all called a municipal bonds.Even though it may be a state bond or a district bond it is still called a municipal bond.The interest on these bonds can be tax exempt which means that if someone holds these bonds they do not have to pay federal income tax and in most cases state income tax. If they had a choice between a Microsoft corporate bond at 8% or a water district bond of 5% the after tax income is the same.The third thing in common is that there is a certain security pledge structure to help determine how they will repay the bonds.The water board issues municipal bonds which means that they are subject to two very large sets of federal laws.The securities laws came out in the 1930's where up to that point people were buying bonds that they found to be worthless.Now every time a bond is issues it has to be a marketable security so the holder needs to be able to trade and sell it to somebody else.They have to comply with a set of securities laws that apply to Microsoft and to the water Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 2 of 7 district.The second set of laws are called tax laws which simply means that in the United States holders of water district bonds do not pay income tax on the earnings.These two sets of laws drive all sorts of requirements that a person would not find in other countries.The water board is known as an enterprise revenue security which means bond holders have no rights or remedies beyond what the water board pledge to them. It is not a general obligation.It does not mean they have to raise taxes.It simply means bond holders know their rights and remedies stop at what the water district pledged.Bottom line is the water district issues municipal bonds.The interest on these bonds are tax exempt so the holders on these bonds do not pay income taxes.The security and pledge is just water system revenues.There is no obligation for the city.The city can elect the council to assist the water district but it is under no obligation to do so.The water district has what is known as a master indenture.It is a large set of legal documents also like a city charter that governs how the water district issues each set of bonds. This indenture was created in 1997 and imposes rather difficult and awkward requirements upon the water district and the water district is looking forward to the opportunity to terminate this indenture and create an easier one so when moving forward it is just as difficult to authorize the debt once the water board has given the authority to do so.The year 1997 was the most complex Mr. Swartz has seen in Arizona. These are obligations of the water district, so if the water district has a problem with investors or the water infrastructure finance authority or whoever holds the water district bonds can only go to the water district.They have no ability to go anywhere else, but the water board has the right to provide assistance to water district if the water district deems necessary.From 1995 to 2008, the water district has gone into debt six times.The first time was in 1995 when the water district was the vehicle by which they bought private water.It was serving most but not all of Apache Junction.There has been five issues since then.In 2004, a series of bonds were publicly sold.The water district went into the market place and investors bought the bonds.It was a public sale and investors are holding those bonds.In 2008, Water Infrastructure Funding Authority was the bond holder. The water district placed their debt with them in the form of a bond.It appears it is in the water district's best interest to get rid of the 1997 indenture which governed all of the debt issued Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 3 of 7 since 1997 to make it easier to issue debt after the water board authorizes it.At the April 1, 2014 water board meeting Mr. Swartz would like to see the water district be able to eliminate and pay off their 2004 bonds.The water board can do so on April 1, 2014 without an interest penalty and they will end up saving $142,000 of interest if they pay off debt early on April 1, 2014 rather than continue to pay them through 2017.Once they defease or pay off these bonds, the bond holders have no rights or remedies.They are going to be paid off on July 1, 2014.This allows the water district to be able to work with Water Infrastructure Funding Authority to terminate the 1997 indenture.They can create a new structure moving forward.On April 1, 2014 the water will be giving the staff the authority to defease the 2004 bonds.This means they are going to give notice to the investors that they are going to be paid off early.They will no longer have rights or remedies.The water district then goes to Water Infrastructure Funding Authority to restructure the 2006 and 2008 loans.This will make it easier to borrow in the future.This meeting is only for information and the April 1, 2014 meeting will be for action that authorizes the staff to defease 2004 bonds and to authorize staff to restructure 2006 and 2008 Water Infrastructure Funding Authority loans.This will get rid of a 17 year old indenture that made it too expensive, cumbersome and difficult to issue and manage debt. DISTRICT MANAGER REPORT None. DISTRICT DIRECTOR REPORT District Director Frank Blanco stated he would take them through a brief report and touched on some of the projects that Mr. Swartz talked about.By defeasing the 2004 debt, they will be able to fund some of the projects.At the April 1, 2014 meeting they will discuss some strategies on how they are going to do this.The Arizona Department of Water Resources recommended that the water district receive 817 acre feet of reallocated Central Arizona Project, non -Indian agricultural water. This was based on the demand and supply balance forecasted in 2020.The 817 acre feet was recommended for the water district by Arizona Department of Water Resources.That recommendation was Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 4 of 7 forwarded to the Secretary of the Interior, Bureau of Reclamation for their review and approval.Bureau of Reclamation are in the process of evaluating the recommendation and they are also to perform an environmental review or environmental assessment possibly an environmental impact statement.It could take 18 months or so for them to do their review.The water district received letters of support from the City of Mesa and the City of Chandler.The availability is anticipated for 2015 or 2016 based on the evaluation of the environmental piece.They do not anticipate on ordering or using this water for the next calendar year.Central Arizona Water Conservation District are going to be the entity that will receives this water.They will be scheduling meetings with the municipalities who did receive part of the reallocation.During those meetings they will be talking about an agreement that will be required for the water district to enter into to actually receive that water.The payment for the water will be about $1.05 million.This will be due within five years of the execution of the final agreement.Since it is an agreement there is an option for the water district to pay for the non- agricultural Indian water outside of a Water Infrastructure Funding Authority loan or directly through the agreement with Central Arizona Water Conservation District.This is an option that the water district will be looking into and presenting to the board.It is important because it would not be part of their loan they have with Water Infrastructure Funding Authority.It would be part of the agreement they have with Central Arizona Water Conservation District.The Gila River Indian Community lease is something that the water district has been working on for some time now.The option was purchased back in March of 2011.The option and lease agreement was executed in March of 2013.The water district will be coming back to the water board with a resolution authorizing the lease and issuing a lease option notice at the next meeting on April 1, 2014.The lease option notice will be issued by the city manager or the water district manager and at the meeting on April 1, 2014 they will be discussing the resolution and requesting approval of that resolution.The lease option notice is due before June 30, 2014.The payment for the Gila River Indian Community water is due on or before July 30, 2014.This payment is about $3.1 million and is based on a 1,000 acre feet at $3,000 per acre foot plus interest.The interest that is charge will go back to March 26, 2013.This is the date that Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 5 of 7 both parties and finally executed the agreement.The lease option purchase was in 2011 but because the Indian community, water district and the United States government did not actually finalize and sign it until March of 2013 this is when the interest would start.To summarize, Gila River Indian Community lease option resolution by the water board will be April 1, 2014, Water Infrastructure Funding Authority board decision on finance application will be April 30, 2014.Option notice by the district manager by June 26, 2014.Funding for Gila River Indian Community lease and Central Arizona Project plant before July 2014.This is based on a Water Infrastructure Funding Authority board decision on April 30, 2014.Payment for Gila River Indian Community lease before July 30, 2014. District Superintendent Mike Loggins gave an update on the water system.He mentioned that last time the board met they approved contracts to pull and replace well #5.Well #5 is now back in service and they are pumping water.They also planned on doing some coating on the Baseline steel tank that was existing there. He presented before and after pictures of coating the steel tank.During this coating project the floor was corroded and had a couple of holes in it where water was leaking out so it had to be repaired as well as coated.This tank will be back in service in a week. Vice Chairperson Barker asked what the life expectancy was for the coating. District Superintendent Mike Loggins stated the life expectancy was 15 to 20 years.After one year they will go in for a one year warranty inspection to do some little touch ups if there is anything problem with the coating.After seven years they will either dive it or take the tank out of service and go back into the tank to see what condition it is in.They will take samples Monday to check for any bio-compounds that might be in the tank before they put it back in service. DISTRICT TREASURER REPORT None ADJOURNMENT ) Chairperson Insalaco adjourned the meeting at 6:28 p.m. Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 6 of 7 ACCEPTED THIS DAY OF Wed/L.,, 2014, BY THE CHAIRPERSON AND DISTRICT BOARD OF THE WATER UTILITIES COMMUNITY FACILITIES DISTRICT,(CITY OF APACHE JUNCTION, ARIZONA). SIGNED AND ATTESTED TO THIS / 5 -7 -DAY OF , 2014. 40- L Aehn S. Insalaco 'hairperson ATTEST: Kathleen Connelly District Clerk WATER UTILITIES COMMUNITY FACILITIES DISTRICT MINUTES CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the regular meeting of the Water Utilities Community Facilities District of the City of Apache Junction, Arizona, held on the 18th day of March, 2014.I further certify that the meeting was duly called and held and that a quorum was present. Dated this 24th day of March, 2014. • I I Kathleen Connelly District Clerk Water Utilities Community Facilities District Meeting Minutes of March 18, 2014 Page 7 of 7